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Assets Versus Medicaid Eligibility

Trust fundMedicaid is a needs-based government program administered by the states, with income and asset limitations that apply before you can qualify for the program’s assistance.

To prevent individuals from just making quick transfers of their property, either outright or in a trust, to qualify for the Medicaid program, there’s a penalty period imposed on transfers made within five years of applying for Medicaid.

The penalty is a period of time, during which the applicant doesn’t get Medicaid benefits after otherwise qualifying because of the amount transferred within the prior five-year period. The penalty period is determined by dividing the amount transferred by the monthly penalty divisor.

In the same vein, if a person creates a trust using some of his or her own funds, where the individual is the sole beneficiary or one beneficiary in a group of beneficiaries, the trust may be considered an available resource for purposes of determining eligibility for Medicaid. It will be counted as an asset when determining eligibility for the program.

This is especially true if the trust can be revoked. A revocable trust and its assets can be “pulled back” into the name of the Medicaid applicant, and be counted as his or her asset for eligibility purposes.

If the trust is created by a third party and with third-party funds for the benefit of the Medicaid applicant, the answer would depend on the specific terms of the trust and whether the settlor (the person who created the trust) is the spouse of the Medicaid applicant.

This is because income and asset limitations are imposed on the “community spouse” (the spouse still living at home), in order for the applicant spouse to qualify for Medicaid.

The state government may also have the right of recovery against the estate of a deceased Medicaid recipient for Medicaid benefits paid to that person during his or her lifetime. This means if the deceased Medicaid recipient's estate has a claim to assets, either outright or in a trust, the state may be able to recover some of those assets.

Reference: nj.com (December 26, 2017) “How trusts fit in with Medicaid planning”

 

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